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Health insurance : Double benefit of Insurance and Tax Saving (Sec 80D Updated)

Don't forget to insure you and your family against medical related problems.

Such policies are highly economical as compared to the average cost of treatment. They will prove hugely beneficial in protecting your finances. It won't be wrong to say that health insurance equals wealth insurance.

Moreover, they come with tax benefit too. This benefit is in addition to the Rs.1.50 lakh limit under Sec 80C.

Section 80D of the Income Tax Act allows you to deduct the premium paid on medical insurance policy — and also expenses on preventive health check-up, plus actual medical expenditure in certain cases — from your taxable income and save tax.

The salient provisions of Sec 80D are detailed below:

One. You are allowed to claim deduction from your taxable income for (a) the premium paid towards buying a health insurance policy and (b) the amount spent on preventive health check-up, for your family comprising self, spouse and dependent children.

Two. The maximum allowable deduction is Rs.25,000 per financial year. Or Rs.30,000 if any of the insured persons is a senior citizen or very senior citizen.

Three. Senior and very senior citizens enjoy one more benefit.

An amount up to a maximum of Rs.30,000 — incurred as their medical expenditure — can also be claimed as deduction. This is, however, subject to two important conditions:
a. Such person was NOT insured under any health insurance policy, AND
b. Total deduction allowed towards health insurance premium and preventive health check-up of the family, plus the medical expenditure, will not exceed Rs.30,000.

sec-80d-tax-benefit
The 2-in-1 benefit of a health insurance policy is invaluable.

Four. You are allowed to claim ADDITIONAL deduction from your taxable income for (a) the premium paid towards buying a health insurance policy and (b) the amount spent on preventive health check-up, for your parents.

Five. The maximum allowable deduction is Rs.25,000 per financial year. Or Rs.30,000 if any of the insured persons is a senior citizen or very senior citizen.

Six. Senior and very senior citizens enjoy one more benefit.

An amount up to a maximum of Rs.30,000 — incurred as their medical expenditure — can also be claimed as deduction. This is, however, subject to two important conditions:
- Such person was NOT insured under any health insurance policy, AND
- Total deduction allowed towards health insurance premium and preventive health check-up of the parents, plus the medical expenditure, will not exceed Rs.30,000.

Seven. For preventive health check-up the deduction is allowed up to a maximum of Rs.5000 only, within the aforesaid limits.

Eight. To claim tax deduction u/s 80D, cash is NOT an eligible mode for paying the premium amount. Premium should have been paid through any mode other than cash.

However, this condition does not apply to the amount paid towards preventive health check-up. So all modes of payment, including cash, are eligible for tax deduction.

Nine. Another important aspect to be kept in mind is that the payment (either towards premium or preventive health check-up) should have been made out of "your income chargeable to tax". 

In other words, if you have paid the premium without earning any taxable income, then the tax deduction will not be permissible.

Ten. Only the health insurance policies — bought from an approved insurance company — are eligible for tax deduction under this section 80D.

This includes policies from
a) General Insurance Corporation of India and approved by the Central Government, or
b) Any other insurer and approved by the Insurance Regulatory and Development Authority of India (IRDAI)

This, in a nutshell, is the tax benefit available towards health insurance premium, preventive health check-up and medical expenses.

The 2-in-1 benefit of a health insurance policy is invaluable. Go get one now!


Note: With regards to Sec 80D the
a) "senior citizen" is defined as the person who is of age sixty years or more (at any time during the given year), and
b) "very senior citizen" is defined as the person who is of age eighty years or more (at any time during the given year)

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